Edited version of your written advice

Authorisation Number: 1051325843657

Date of advice: 15 January 2018

Ruling

Subject: Capital gains tax

Question 1

Will the Commissioner exercise his discretion on property B under subsection 118-195(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and allow an extension of time to settlement date?

Answer

Yes

Having considered your circumstances and the relevant factors, the Commissioner is able to apply his discretion under subsection 118-195(1) of the ITAA 1997 and allow an extension of time until settlement date. Further information on the relevant factors and inherited dwellings generally can be found on our website ato.gov.au and entering Quick Code QC52246 into the search bar at the top right of the page

Question 2

Are you entitled to a partial exemption and subject to first use to produce assessable income rule on property A under subsection 118-192(1) of the ITAA 1997?

Answer

Yes

In your case you are treating property A as your main residence from acquisition until it was first used to produce assessable income. After this period you are treating Property B as your main residence. Therefore the special rule in 118-192 of the ITAA 1997 applies because you only get a partial main residence exemption.

This ruling applies for the following period:

30 June 2017

The scheme commences on:

1 July 2016

Relevant facts and circumstances

You purchased property in 19XX which consisted of one dwelling and was less than two hectares. This initially became your main residence.

In 20XX, your local Council granted you a planning permit and you obtained an owner-builder permit.

You commenced building on the property and constructed a new single level unit at the rear of the property.

The property then became known as property A & B and was treated as two separate assets.

From 20XX, property A was used for the purpose of producing assessable income until your date of death.

You moved into property B and chose to make this dwelling your new main residence.

The occupancy permit for property B was issued to you in 20XX.

You passed away in 20XX and you left no Will.

A trustee was appointed by the court as the administrators of your estate in 20XX.

You had a relative who resided in Australia and three relatives who resided overseas that were all named as the beneficiaries.

It took considerable time to locate the beneficiaries overseas.

There were also further delays in obtaining building reports and as an owner-builder this is a mandatory requirement before the sale of a property. Your administrator had to apply to the court to enable the property be sold and this order was granted in 20XX.

From your date of death, the property ceased to be income producing. As the property was vacant, squatters moved in. This resulted in police and court intervention to have the squatters removed. This happened on more than one occasion and was finally resolved in 20XX.

General repairs and maintenance was also required to be undertaken in restoring the property to a state suitable for sale.

Both property A & B sold but the purchaser requested an extended settlement period.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 104-10

Income Tax Assessment Act 1997 section 118-192

Income Tax Assessment Act 1997 section 118-195

Income Tax Assessment Act 1997 section 118-200

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